I was asked recently to discuss employee share ownership schemes. This was my response:
The idea that employee share ownership can transform capitalism rests on a single, very simple assumption: that if workers own shares in the companies they work for, their interests will be aligned with those of capital, and the system will become more stable and productive.
At first glance, that sounds attractive. Workers share in profits. Companies benefit from motivated staff. Conflict supposedly declines.
But there is a fundamental flaw in the argument: ownership without control is not power.
Most employee share schemes give workers a small minority stake in their employer. Those shares may produce dividends or capital gains, but they almost never confer meaningful influence over corporate decisions. I know: once upon a time I set up these things and then realised they were con-tricks. The board still governs the company. Large investors still determine outcomes. Executives still make strategic choices. In other words, nothing about the fundamental structure of power inside the corporation changes.
That matters because the central issue in modern capitalism is not simply who receives income, but:
- Who exercises control?
- Who decides investment strategy?
- Who determines wage policy?
- Who chooses whether profits are reinvested, distributed, or used to buy back shares?
- Who decides whether a factory closes or moves abroad?
A few employee shares do not answer those questions.
Without real power, employee share ownership can actually become something quite different from the benign reform its advocates imagine. It can become a new mechanism of labour discipline.
Once employees are told they are “owners”, management acquires a convenient argument: do not challenge decisions, do not push too hard on pay, do not disrupt the company, because doing so would harm “your” business and reduce the value of “your” shares. In other words, employees are encouraged to internalise the interests of capital while still lacking the authority that normally accompanies capital ownership. The danger is obvious. Instead of democratising capitalism, employee share ownership without control risks becoming another form of exploitation, one that uses the language of partnership to reinforce existing hierarchies.
If employee ownership is to be meaningful, it must redistribute power as well as shares. That means, at a minimum, two things.
- First, workers must hold collective majority control of the enterprise, whether directly or through structures such as employee ownership trusts, or
- Second, employees must have guaranteed representation on company boards, with real authority over corporate strategy and governance.
Without those conditions, employee share schemes change very little. They may provide employees with a modest financial benefit, but they do not alter the fundamental relationship between labour and capital.
And unless that relationship changes, the claim that employee share ownership transforms capitalism is simply not credible.
Shares alone do not create economic democracy. Power does. These proposals fail as far as I am concerned. They are invariably designed to exclude access to power.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
I knew someone who worked for BT and someone else who worked at HSBC.
Both did rather well out of these schemes – BUT possibly at the expense of ‘over exposing’ at least one of them to their employers shares.
But of course if you don’t work for a publicly quoted company then you dont get that particular savings option, its rather like the right to buy your Council House, Help to Buy etc some people get to make a lot of money but not all of us.
The idea came from France and it was meant to get around the problem of succession in small business’s and allow the staff to ‘buy out’ the owner at retirement age. While I might suggest that this has some merit, in its current form in the UK it does not.
A point well worth making.
My late mother got taken in by Thatcher’s popular share ownership con when she bought shares in British Gas when it was privatised (this was a working class woman by the way, so I reckon she had a very small amount). She honestly believed in it and kept her shares for a long time but towards the end she was told in letters by the majority owners that her shares were worth nothing really because as you point out ownership without power is nothing.
No wonder she ended up thinking that Farage was the answer to ward the end of her life.
I was briefly supportive of the B-Corps model but while ameliorating some aspects of the asymmetry it doesn’t significantly change the fundamentals. There is something required that can’t be legislated for which is the trust and respect that goes with the recognition of each persons contribution. Decisions have to be collaborative while informed by the people who have gained the trust and respect of others in their expertise.
When it comes to the method of deciding I have also moved from voting to consensus. Voting is embedded in a dualistic culture which usually breeds conflict and entails winners and losers. Consensus, while more difficult to achieve, brings everyone along while acknowledging that the strength of their belief in the course of action is varied. Along with this, of course, is needed the humility to admit that a decision has not worked when it hasn’t and those who proffered different paths listened to anew.
Collective control – proven to work (I think there was a print company in Scotland that operates very successfully as a collective).
Ownership of shares – proven not to work – as the Russian experience showed in the 1990s.
Back in the day I worked for a private company with a few hundred staff. The staff shared a minority stake in the company. It was an unlisted company. The shares could not be sold or traded. They had zero control. It was blatant con to try to improve morale. In the end the company was bought by venture capitalists, though I had left by that time. No one received anything from their supposed stake in the company.
What about the German system of worker representation on company boards?
Or is it too 1980s?
https://en.wikipedia.org/wiki/Worker_representation_on_corporate_boards_of_directors
“They may provide employees with a modest financial benefit,”
define modest !! My wife has been in the share s heme for 8 years and because the shares have performed well she is currently showing a gain after tax of £17400, that to us is meaningful !!
So true, it’s not real democracy at work. Would say vast majority of employment is within a patriarchal system.
Even the idea of democracy in the workplace is strange to people. We’re trained to accept a very weak version of democracy.
Giving employee shares is a form of hope for a future reward. The company hopes that the employee will stay and add to its profitability and the employee hopes that the shares can be sold at some time in the future and add to their wealth.
It’s a form of golden handcuff which is absolutely no benefit to the state whatsoever until the shares are sold. It’s an easy option for the employer as they can either dispense shares from their existing unallocated shares or they can create new ones. Both are alternatives to paying higher wages/salaries or bonuses, which would be taxed and where the money would go into general circulation and increase the nations wealth if/when the money is spent, ideally through a well-constructed and regulated taxation system.
So, I dislike employee share schemes as they are yet another way in which neoliberal capitalism seeks to maximise it’s control over employees and wealth distribution.
As someone who’s been burned exercising employee shares options where the company then failed and I’d had no say in what they did, I don’t completely disagree with this view.
However, mandatory board representation on its own still means while the majority has control and actions against employees will get more push back and scrutiny, so in itself it is clearly better than not having that representation.
Within tech companies, it’s not uncommon to see share schemes that would offer a substantial upside if there is a liquidity event – at least tens if thousands, likely more.
For ongoing employees, they wouldn’t necessarily own the shares, just hold options, and wouldn’t inherently have voting rights. An employee share scheme should therefore have a representative at board level that specifically represents employee interests including options holders.
Majority owned by employees is quite different, and has it’s own benefit, but realistically few founders are willing to pass the majority of the company to their employees.
Far better to focus on where the majority most negatively impacts on workers – often once external investment has a majority ownership instead of the founders, then there is a shift towards focusing on numbers over people.
The 1977 Bullock Report recommended worker appointed directors for all boards of companies with more than 2000 workers. Needless to say it got nowhere, and even if it had been implemented it would not have survived Thatcher’s assault on workers and especially Trades Unions rights. Perhaps it might bear re-reading because as this thread shows, the capitalist ‘alternative’ Employee Share Option Schemes really ensures the status quo remains undisturbed.
Of course giving the workers the right to appoint a board member can be a poisoned chalice for whichever lucky soul gets the job if things go wrong